FCC says new cable cuts are better

February 23, 1994|By Boston Globe

Consumer advocates are calling a move by federal regulators to reduce cable TV rates by 7 percent "a moderate victory," but cable system operators are cautioning that some subscribers still might not see their rates decline.

The Federal Communications Commission yesterday ordered the cuts following complaints that its first attempt at rate-cutting 10 months ago had only partly succeeded. The commission mandated reductions of 10 percent in April, but loopholes in the regulations allowed cable operators to increase rates for nearly 30 percent of the nation's 57 million cable subscribers.

This time, the FCC promised a better plan. With a 3-0 vote yesterday to again cut rates, the FCC said it was saving consumers $3 billion and lopping 17 percent off the average monthly cable bill when added to the earlier 10 percent cut.

Cable operators said that until they see details of the new plan, expected within 30 days, they do not know how rates will change.

Nationally, several cable operators already knew enough not to be happy with the new plan. Gerald M. Levin, chairman and chief executive of the nation's second-largest cable company, Time Warner Inc., summed up the FCC action as "arbitrary, unfair and unacceptable."

But a key lawmaker agreed with the FCC the new plan would bring rate relief.

The watchdog Consumer Federation of America was tepid in its response. "It's a moderate victory for consumers," said Bradley Stillman, the group's legislative counsel. "Exactly how it's going to play out is hard to tell."

In general terms, the FCC says, its moves yesterday and in April will force operators to cut cable rates by 17 percent below their level of September 1992. About 90 percent of cable systems will be required to lower prices, the agency says.

However, subscribers should not expect to see 17 percent decreases starting May 1, when the new rules are slated to take effect.

To begin with, many operators already lowered rates after the FCC ordered cuts last year. And the FCC allows operators increases to account for inflation.

Further, the FCC will devise rules to reward systems for adding channels, increasing the quality of service and investing in equipment. Systems that make those upgrades will be allowed to recoup some of their costs.

"People are either going to be paying less for the same service or are going to be paying the same for more service," an FCC official said yesterday.

The FCC does not regulate rates for such "premium" channels as Showtime and HBO, as well as pay-per-view programs. In addition, the agency exempted two types of cable systems from rate-cutting for the time being: a small number of systems deemed to be charging low rates already and operators who serve a small number of subscribers. The FCC sets apart small operators because they pay relatively high costs to deliver service and contend with lower profit margins.

The philosophy guiding the rate regulations is that systems with monopolistic control of a market should charge rates similar to those where competition has driven prices down. Only about 3 percent of subscribers, in 50 or 60 cable systems, live in competitive markets.

The FCC's first attempt to tame rates led to some consumer protests. In April, the agency ordered cable operators to set prices for equipment -- such as remote-control units and additional TV hookups -- according to cost. The commission also set "benchmark" rates that limited the prices for programming.

But in October, an FCC study revealed that while cable bills fell for two-thirds of subscribers, they actually rose for about 30 percent of subscribers.